Due to the leak in the gappy western equatorial Pacific, sea level (SL) is highly correlated with El Niño all along the western Australian coast. According to standard theory, this coastal interannual (IA) signal should propagate westward as Rossby waves with large zonal scale. High-resolution satellite SL estimates show that along the shelf edge south of 23°S the IA SL signal does not have the expected large spatial scale as it decreases rapidly seaward from the shelf edge. The drop in IA SL amplitude coincides with the mean position of the Leeuwin Current (LC). Theory shows how a nearly meridional mean flow, as in the case of the LC, can induce this fall in IA signal amplitude. The associated IA shelf-edge flow tends to strengthen the LC during La Niña, weaken it during El Niño and may profoundly affect the recruitment of the western rock lobster.